The Bank of Japan (BOJ) and the European Central Bank (ECB) are among central banks that have effectively started charging commercial lenders for the privilege of parking their funds in recent years, marking one of the most dramatic steps yet in policy efforts to fuel growth after years of lackluster economic activity.

The aim was to encourage banks to lend more by making it costlier to just place funds with central banks but it isn't clear whether the policies have had the intended effect.

"The tool that many central banks, particularly the Bank of Japan and the European Central Bank, have come to rely on is proving to come with some serious baggage," Koesterich said. "It exerts a tax on the banking system and it's very hard to accelerate an economy when the banking sector is struggling."

The BOJ blindsided global financial markets on January 29 by adopting negative interest rates for the first time, amid pressure to revive growth in the world's third-largest economy as it struggled to create inflation. The move aims to motivate banks to both lower lending rates and lend more by charging banks to hold their reserves with the central bank.

That followed moves by the ECB, starting in 2014, to turn to negative interest rates. Last week, the ECB went deeper into negative territory, cutting its main refinancing rate to 0.0 percent and its deposit rate to negative 0.4 percent.

Central banks in Sweden, Denmark and Switzerland have also adopted negative rate policies.

That comes as quantitative easing (QE) programs -- which were introduced amid the Global Financial Crisis in 2008 to allow central banks to purchase assets such as government bonds to push investors into riskier assets -- appear to be losing their ability to awe markets, Koesterich said.

"This many years into the advent of QE with valuations higher in many countries, particularly the United States and Europe, we're finding that it's more difficult for the central banks to reflate asset prices," he said. "That means the wealth channel by which some of the earlier manifestations of QE worked is proving less effective than it was in past years."

But that hasn't kept BlackRock from investing in equity markets.

"We still think that over the long term -- and I think that's a key qualifier -- equities represent better value than bonds," he said. But he noted that while bonds are expensive, they act as a hedge against volatility in portfolios.

He added that investors should consider adding a bit of gold, which acts as a safe haven asset, to their portfolios to mitigate market volatility.

Outside of the U.S., Koesterich is positive on Japan's shares, citing solid valuations.

He's also positive on emerging markets.

"This is an asset class that many people have abandoned over the last five years. It's consistently underperformed. There are structural issues. Investors are understandably concerned about China," he said. "But that long period of underperformance has left many emerging markets actually quite cheap," he noted, adding that this is a reasonable time to start adding allocation to the segment.

Among emerging markets, Koesterich particularly likes Mexico and India, citing long term structural reforms in those markets.